Under the Income Tax Act, 1961, depreciation on machinery is charged on:

Answer: Option B

Explanation:
The correct answer is B: Written down value of the machinery.

Let's break down why:
* Depreciation is the reduction in the value of an asset (like machinery) over time due to wear and tear or obsolescence.
* The Income Tax Act, 1961 provides rules for claiming depreciation to reduce your taxable income.
* Purchase Price: This is the original cost of the machinery, but depreciation isn't calculated on this every year. It's used initially.
* Market Price: This is what you could sell the machinery for *now*. This isn't used for calculating annual depreciation.
* Written Down Value (WDV): This is the original cost of the machinery *minus* the total depreciation that has already been claimed in previous years. Depreciation for the current year is calculated on this reduced value. So, WDV keeps changing every year.

Therefore, under the Income Tax Act, depreciation is charged on the Written Down Value of the machinery.